'How much lower can hog prices go? And if we liquidate a lot of hogs, won't corn and soybean prices crash as well?"

A young farmer asked those two questions before a recent seminar even began. The young man had just sold hogs at 14 cents/lb, and I could tell that he was under a huge amount of stress.

Ever since I attended my first commodity outlook seminar sponsored by Jim Gill in 1974, I've been a student of price cycles and a believer in the "law" of contrary opinion.

Understanding long-term price cycles and the emotion of the market has helped me avoid getting negative and making sales at major commodity price-cycle lows.

In early September of 1998, the mood was extremely bearish, but many cyclical indicators did suggest that a major low was due.

This Monthly Chicago Board of Trade (CBOT) Soybean Continuation Chart shows the price of soybean futures back to 1973. (see printed article) I have marked the major price cycles. The dominant soybean long-term price cycle averages five to six years between lows. The major lows in soybeans occurred in 1968, 1974, 1980, 1986, 1991 and September 1998. Several cycles in the corn, wheat, and soybean markets were all due to bottom in the fall of 1998. This created very low prices during that period.

Another time cycle in soybeans suggests a low every 24 to 30 months. The monthly chart shows lows came in March 1980, September 1982, November 1985, August 1987, October 1989, September 1991, October 1994, November 1996 and September '98.

Note how often these patterns have bottomed in August to November. Also note that you have to go back to 1991 or 1986 to find a time when the long-term five- to six-year cycle, the 24- to 30-month cycle and the seasonal price pattern all are in synch, projecting higher prices. This bullish analysis will prove to be correct if nearby futures stay above the September 1998 low at $5.12 when prices bottom in August to October of 1999.

As one farmer told me recently, "I do not need help with the lows. I need help finding the highs."

The shorter-term soybean seasonal (12-month) cycle probably is still one of the best tools that producers can use to make selling decisions. The first step is to establish realistic price objectives at which you're willing to sell your crop. Our long-term chart retracement studies suggest a 40% chance that nearby soybean futures will rally to $6.10 or higher. If that target is hit, we will likely recommend getting 50-60% of your 1998 crop sold.

The next objective would be at $6.45. If that objective is hit, we will likely get up to 80-100% sold. That is a great plan - if the price objectives are reached. If not, then having a secondary, seasonal plan is very important.

The seasonal price plan is to get at least 50% sold by mid- April, 80% sold by mid-May, and the balance of the crop sold between June 20 and July 10, even if the price objectives are not hit. The long-term chart shows that holding cash soybeans into the August-to-November period is the wrong merchandising and business decision.

Long-term cycles suggest that holding some of your cash soybeans into the spring and summer of 1999 is likely to pay off. For many producers the question becomes, how do you control risk on those soybeans? Here are two alternatives that worked well in 1997 and 1998.

If you need to price your soybeans to make payments or get your 1998 operating loan paid off, then selling all of your cash soybeans and holding an at-the- money July CBOT soybean call option may be a good merchandising decision. This allows you to get 90-95% of the value of your soybeans today. By owning the call option you can still make additional income if soybean futures move higher.

The cost of a call option is usually equal to or less than the interest cost of carrying cash soybeans until option expiration on June 18. In 1997, 20 cent calls went up in value by over $1/bu. In 1998 they expired worthless, but the loss was minimal vs. the drop in the cash soybean market.

If you're holding over 70% of your soybeans into the spring and summer in your own storage, a second alternative is to control downside price risk by buying a put option. This is especially true if you locked in your loan deficiency payment (LDP) last fall and don't have the government loan as a floor for your crop.

By buying a put option, you will hold together a net price that is higher than your county loan level if prices crash lower into this spring and summer. You can still benefit if prices move higher and the put ends up worthless.

In 1997, puts were worthless, but with cash soybeans rallying to $8 or higher, the net price was still at an excellent profit. In 1998, puts gained in value as soybean prices plummeted to the major lows in September.

In summary, make sure you have a plan in place, and get ready to sell if your price targets are hit. Long term, the next major low is due in the fall of 2003 to 2004, and seasonal price cycles suggest a secondary low in August to October of 1999. So make sure you don't have to sell any 1998- or 1999-crop soybeans in that period.